It's a Matter of Choice

When the first financial institutions were opened in this country, it was a simple matter to become a depositor. You simply put your money into the bank, which held it in your name - in the form of a savings account. If you sent a note to the bank, instructing them to pay certain amounts to the bearer of the note, the bank generally complied.

Then along came checking accounts. Now there was an order to pay, and the bank assumed certain responsibilities on this negotiation. But you could still have the good old savings account. Now you kept track of it in a passbook. You had a choice. We've now added to that list the certificates of deposit, NOW accounts, IRA accounts, trust accounts, sweep accounts, interest bearing accounts, joint accounts, corporate accounts, proprietorship accounts, escrow accounts, estate accounts - numerous products to choose from.

We've also added to the financial institutions. Now there are international banks, national banks, state banks, savings banks, savings and loan associations, credit unions, internet banks, and some other hybrid financial institutions that function like banks but are named everything under the sun - e.g. "ING".

The depositor's choice. The government felt there had to be some common ground, some basic rules set forth to safeguard the funds held by those financial institutions. Again, there was a choice, depending on what type of financial institution it was, where it was located, or what it chose. The FDIC, the Fed, OTS, OCC, CUNA, and now even the FTC comes into play in some cases.

The financial institution has its choice. But when it comes to the regulations, rules and laws that govern all those financial institutions, there is no choice. No matter how large or how small the office or the assets, the rules are all the same. The regulations are written for all financial institutions, even though - as any woman can tell you - there is NO "one size fits all" anywhere in the world.

The problem arises when the examiner arrives at a financial institution to see if all the rules, laws, and regulations are being adhered to in the correct manner. The regs have come down, written in "governmentese" and have to be translated to everyday instructions. Much of what has been given to us lately is subject to translation - and the examiner's may be different from the institution's.

It's easier when you're bigger. For instance, there is a person who works full time on taking apart the USA Patriot Act section by section. That person goes to seminars and meetings to learn about the Act and then spends all day studying all the details of the Act and applying them to the policies and procedures in place. Changes are recommended to meet requirements, they are communicated, approved, put into place, and monitored. That's his job - his only job.

It's not that easy in smaller financial institutions. The person who is responsible for applying all the nuances of the USA Patriot act is also the person who makes sure the CTRs are filled out right, files the SARs, and is often also in charge of operations, investigations, claims, accounting, taxes, human relations, payroll and scheduling. If he's lucky, he's not a loan officer. He has a choice, too, but his choices have to be prioritized.

Sometimes the examiners who come in to the small bank have the mentality of the big-bank outlook. They're specialized, and particular. The day-to-day functioning of the branch doesn't figure into their equation of compliance. It can lead, and is leading, to a high level of frustration in the smaller institutions.

BankersOnline.com, the BANKERS' HOTLINE, and COMPLIANCE ACTION do what we can to keep you on top of the changes and the requirements. But this year the changes are almost overwhelming. The Patriot Act, OFAC, Privacy, Check 21, RESPA, BSA, FACT Act, and more have to be dealt with - correctly for survival. And personnel vacations are about to begin - "Hello, part-time, untrained staff." Even with our help, you may still have a choice on which is going to give you the most difficulty.

Copyright © 2004 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 14, No. 2, 5/05